Note 3. Inventories

Inventories consist of the following:

The Company maintains significant levels of inventory that exceed current demand. Management believes that these excess quantities will be utilized over several years. Therefore, the Company has classified $13.0 million and $17.0 million of inventories as noncurrent assets at March 31, 2004 and December 31, 2003, respectively.

Note 4. Comprehensive Income

Comprehensive income for the Company includes net income from foreign currency translation which is charged or credited to the cumulative translation account within shareholders’ equity. Gains and losses from foreign currency translation are not material.

Note 5. New Pronouncements

In December 2003, the FASB issued FASB Interpretation No. 46R (FIN 46R), Consolidation of Variable Interest Entities, which addresses how a business enterprise should evaluate whether it has a controlling financial interest in an entity through means other than voting rights and accordingly should consolidate the entity. The Company believes it has no variable interest entities and, therefore, FIN 46R did not have an impact on the Company’s consolidated financial statements.

Note 6. Subsequent Event

On April 26, 2004 the Company signed an exclusive development and licensing agreement with ErySave AB and made an initial milestone payment of approximately $0.2 million. The agreement grants the Company worldwide rights for ErySave’s filtration technology for cardiac surgery procedures. Payments under the agreement, based upon the achievement of certain development milestones, could total approximately $1.3 million.

7